The mood music coming out of China hasn’t improved over the summer, with the latest figures showing factory output, consumption and investment all fell more than forecast in August.

At the same time, the decline in residential property prices seems to be accelerating with new-home prices in 70 cities dropping by 0.7% on a monthly basis in August after a 0.65% fall the month before and existing-home prices falling by 0.95% against 0.8% the previous month.

Although the Chinese market was closed on Monday due to holidays, the news added to the gloomy investor sentiment towards local stocks after a slump which has lasted since May and increases the pressure on the government to come up with some kind of stimulus package to rescue the economy.

‘The fear is the authorities are losing control of the economy and they won’t admit it,’ said Gary Dugan, chief executive officer of the Global CIO Office, in an interview with Bloomberg.

‘The market looks set to go to significantly lower levels in the absence of real, substantial new policies,’ added Dugan.

Current support measures such as interest-rate cuts and the buying of ETFs (exchange-traded funds) by state-owned funds have done little to change sentiment, with an estimated $6.8 trillion having been wiped off the value of Chinese and Hong Kong-listed stocks since the market peaked in 2021.

Renowned emerging-markets veteran Mark Mobius believes government stimulus can only do so much in the current business climate.

‘The real problem is the entrepreneurial impetus is missing, with lots of businessmen unwilling to invest,’ he told Bloomberg.

‘It will be necessary for the government to loosen up on private enterprise restrictions and regulations so the private sector can be stimulated and help grow the economy.’

Meanwhile, measures to revive the property market such as a campaign to buy up unsold homes to ease the oversupply have had little effect as local authorities have dragged their feet over implementing them.

The government also rejected a call by the IMF (International Monetary Fund) to use public funds to complete and deliver unfinished properties, insisting it apply ‘market-base and rule-of-law principles’ instead.

In response, developers have cut the price of new homes, which in turn has sent shares in the Shanghai Property Index down roughly 25% since its peak in May, wiping out yet more investor wealth and compounding the problem.

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